For the next decade, lithium is gold. If the Millionaires’ Club is one of your aspirations, continue reading about these lithium stocks that are worth holding for the long term.
To elaborate on my point related to lithium, the following estimate is worth noting.
By 2035, the global lithium supply gap is expected to be acute. Lithium supply is likely to be lower by 24% (1.1 million metric tons) as compared to the demand. Given this impending scenario, I expect lithium to remain in an uptrend for the next 10 years.
For lithium companies, higher realized price coupled with production growth will imply robust upside in cash flows. This will boost shareholder value creation. Given the correction in lithium price from highs, it’s a good opportunity to accumulate some of the best lithium stocks.
Let’s discuss three lithium stocks to buy for multi-bagger returns potential.
Albemarle Corporation (ALB)
Albemarle Corporation (NYSE:ALB) is the top name among millionaire maker lithium stocks. At a forward price-earnings ratio of 10.5, the stock looks deeply undervalued. Further, a dividend yield of 0.66% might not be attractive, but dividend growth is likely to be robust in the next five years.
One reason for relatively depressed valuations is the correction in lithium prices from highs. However, the long-term outlook is positive considering the demand from EVs. It’s worth noting that even with relatively lower price realization, Albemarle has guided for revenue growth in the range of 35% to 55% for 2023. Additionally, the company expects operating cash flow of $2 billion.
Another positive is the company’s sustained investment in building its lithium conversion capacity. Albemarle expects lithium sales volume to grow at a CAGR of 20% to 30% through 2027. This, coupled with higher price realization, will translate into robust free cash flows.
Lithium Americas (LAC)
Lithium Americas (NYSE:LAC) is another millionaire maker lithium stock to buy. In the last 12 months, LAC stock has remained sideways. Considering positive business developments, a big breakout on the upside is imminent.
A major upside catalyst is the company’s decision to create two separate entities. Lithium Americas will remain a North America-focused lithium company. Similarly, Lithium Argentina will focus on multiple assets in Argentina. This decision is likely to unlock value.
From an asset perspective, the Thacker Pass project in America has an after-tax net present value of $5.7 billion. The asset is likely to deliver an average annual EBITDA of $1.1 billion with a mine life of 40 years. Once production commences in this asset, cash flows will be robust.
It’s also worth noting that Lithium Americas has entered into an agreement with General Motors (NYSE:GM). The latter will be investing $650 million in the Thacker Pass project. Further, a binding supply agreement provides Lithium Americas with clear cash flow visibility.
Piedmont Lithium (PLL)
Piedmont Lithium (NASDAQ:PLL) stock has witnessed a strong rally of 73% in the last 12 months. PLL stock, however, remains attractive for exposure over a time horizon of five years.
As an overview, Piedmont has some quality assets. The company has 100% ownership in Tennessee and Carolina project. Both these assets have a combined net preset value after-tax of $4.5 billion. Further, the company has 50% and 25% stake in Ghana and Quebec assets. Once these assets deliver commercial production, Piedmont will have robust cash flow visibility.
It’s worth noting that the Quebec asset restart was achieved in March. The company expects first shipments and revenue from Q3 2023. This is a potential catalyst for the stock trending higher.
Of course, other key assets will commence production in the next few years. However, I expect PLL stock to trend higher if the project’s progress remains on track. Further, once lithium uptrend renews, asset valuations will change.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
